Historically, the real estate industry has been resistant to changes. However, as technology advances and disrupts most businesses, the property sector realised it was time to embrace change – and so PropTech was born. Well, kind of.
In the US, the term CRE Tech has been used for a while and refers to technology innovations that support the commercial real estate landscape. In European markets, however, PropTech is preferred. Everywhere, professionals agree that, in fact, RE Tech came first. Nowadays, it seems these terms are almost synonymous, with the buzzword PropTech alluding to both commercial and residential sectors.
Nick Romito, CEO and founder of asset management platform VTS, simplifies:
“The idea of PropTech, for me, is about transforming the commercial real estate industry without disrupting it – integrating cutting-edge technology with big data and predictive analytics that align exactly with what professionals actually do in a way that is much more intuitive, insightful and easy-to-use”.
Whatever is the chosen term, one thing is clear: just like in other industries, real estate businesses simply can’t take full advantage of PropTech – or RE Tech or CRE Tech, for that matter – until a complete digital transformation is adopted. Technology is, after all, the core of PropTech, and any company that resists its implementation is in the risk of being left behind.
“In any discussion about PropTech, one must focus on both the outcome, PropTech, and the cause, the Digital Transformation of the built environment. One will not exist without the other”, says James Dearsley, PropTech consultant and co-founder of data platform Unissu. “If property professionals want to remain knowledgeable about the current and future state of the industry and the innovations that are going to disrupt the traditional way of doing things, they must take in a much broader picture than just PropTech”.
While the traditional high-street estate agent business might be in decline, investments in the property industry continue to rise – they are just being redirected to digital. Many property investors and managers now transfer their technology needs to providers – and those who are able to track and predict trends in the industry are the ones driving PropTech forward. It just makes sense, therefore, that companies look at big data as a guide to new opportunities.
In this transitional period when the industry is working to change and adapt, digital data is the most valuable asset because it can provide meaningful insights on the current market landscape, analyse brand equity and predict trends anywhere in the world.
“As digital becomes the primary channel for researching, engaging and transacting across a broader range of industries, the value of digital data in evaluating global market landscapes, analysing brand performance and predicting future trends increases correspondingly”, says Ben Martin, onefourzero’s Insights Director.
A recent survey by Property Week with real estate professionals revealed that the sector is still behind in its digital transformation. At the same time, many confirm that technology already has a big impact on day-to-day operations and future investments. This shows that the market is increasingly aware of PropTech and open to change, even if it’s still unsure on how or where get started.
“Whilst the act of buying or letting properties is far more complex than, for example, tapping a card to buy coffee, the process of reaching the final act is slow and laborious. The property industry needs to make make the process as seamless and secure as possible. This is what the modern consumer demands”, reminds Dearsley.
And although PropTech might still need to mature before it reaches the same level of disruption in real estate that FinTech did in finance, the next couple of years are set to see exciting developments. We have already seen interesting M&A activities in the sector by industry powerhouses such as JLL, CBRE and CoStar.
As commercial real estate giants become PropTech investors, bolstering confidence in the sector, the industry might notice speedy changes. The latest Mid-Year 2018 Global PropTech Confidence index by MetaProp revealed that 96% of investors are planning to make either the same number or more PropTech investments in the next 12 months compared to the previous 12 months, compared to 76% a year ago. According to the same report, 57% of investors are expecting to see more pitches in the next year, down from 76% at year-end 2017.
It looks like the PropTech disruption is about to take off. To take advantage of such a positive scenario, companies need digital data more than ever to prepare themselves, invest wisely and, of course, maintain profitability.
“PropTech must do more than simply innovate and disrupt. It must understand its role in the broader picture, it must educate and mediate, it must listen to the needs of professionals and consumers, it must not disrupt for the sake of disruption. It must aid private businesses to run more efficiently, with greater returns, whilst simultaneously working to address and solve current societal issues such as sustainability and affordable housing”, defends Dearsley.
Proptech has the potential to transform how customers, professionals and investors interact with the real estate industry – and, as usual, early adopters have the edge.